Rebuilding our manufacturing sector
August 10, 2012 6 Comments
Manufacturing and the well-paying jobs it has created have been the backbone of Western economies since the industrial revolution. However as technologies changed and globalization became a factor many businesses chose to relocate their production to take advantage of less expensive labour costs. In the late 60s and early 70s this was not seen as a risk as many believed that employees of emerging economies did not have the required skill set to complete complex jobs. In their minds, only the industries that currently paid little like textiles would leave and those industries like pharmaceuticals, automotive and aerospace would remain strong. This philosophy held true in the 70s and 80s however it was very short sighted.
As these emerging economies started to develop their industry, they utilized the revenue to develop infrastructure and education. This meant that more technically driven industries had the resources to locate their manufacturing to these countries and gain an economic advantage. Technology advances in computer automation and robotics also assisted in reducing demand for highly skilled laborers and the rate of manufacturing closures in developed nations began to occur rapidly. This trend is likely to continue as employees in Europe, Japan and North America have adjusted to a middle class lifestyle. So then, how can domestic manufacturing remain competitive?
There are certainly some standard reasons to maintain manufacturing in these markets. Examples of this could include the industry being heavily dependent on natural resources that are specific to a geographical area or the end product consumer is located in a small market and freight of the finished good is still cost prohibitive to locate elsewhere.
These few reasons however are not enough to maintain a highly competitive manufacturing industry. So what are some other ways that one can create a competitive advantage?
Continual Improvement or Lean Manufacturing programs: Finding and reducing wastes, inefficiencies, downtime and other high cost issues in typical manufacturing can negate the low cost labor advantage.
Supply Chain Management: Working with vendors to reduce working capital and ensuring proper inventories and high quality product.
Diversification: For years we have defined ourselves by our product and not our capabilities. Utilizing capabilities to sell newer products or even selling process to others to create economies of efficiencies can increase revenues and maintain competitiveness.
Lead Times: Efficient manufacturing also means low lead times and reducing your customers need to carry inventory. This is a cost savings (or cash savings) that they can understand. If your competitors are stuck on ocean freight they cannot compete on this.
Service: Truthfully we all make errors it is how we deal with them that leaves an impression on your customer and ensuring that they are dealt with immediately is always impressive.
Employees: Never underestimate your greatest resource. Involve them every day in the decision making and problem solving and they will not only be more engaged in finding solutions if your company is facing difficulties, it may prevent you from ever getting in that situation.
These are some of the keys we believe to manufacturing surviving in developed economies. Do you have any ideas that can help rebuild a sustainable manufacturing sector?